A leading property-casualty insurance trade organization recently released a policy paper that said more study is needed before creating state and/or federal funds to shore up the insurance industry after a mega-catastrophe.
An official of the National Association of Mutual Insurance Companies said it is too soon for a decision on whether a state and federal funding system for big weather disasters is needed. NAMIC's call for more study noted that an event comparable to the 1906 San Francisco Earthquake could “test or exceed” the capacity of the private marketplace to provide adequate coverage.
“This would be particularly true where some insurers could potentially be unable to meet their claim obligations and still offer protection going forward,” the statement said.
Earlier this month, NAMIC urged Congress to consider creation of state and federal catastrophe funds to shore up the industry in the event of a mega-catastrophe. The American Insurance Association immediately opposed such a program, while the Property Casualty Insurers Association of America and NAMIC are taking a more wait-and-see approach.
Robert Detlefsen, NAMIC public policy director, said that too many questions are so far unanswered, particularly in regard to the actual insurance capacity, to rush to judgment as to whether state and federal backstops will be needed in the event of a mega-catastrophe.
The NAMIC paper took traditional insurance industry stands on the need for competitive rating for property coverage and more actuarially sound pricing for the National Flood Insurance Program.
In addition, the paper called for mitigation measures to make properties in harm's way better able to withstand catastrophes, an “indispensable aspect of any risk management and insurance initiative.”
Federal financial incentives to encourage states to adopt and enforce strong building codes should play a critical role in any such plan, the statement said.
This article originally appeared in The National Underwriter P&C. For the complete article, please click here.
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